The past week started just as brutal as the previous one ended. After making a new low on Monday in the overnight session, the market rallied 50+ points from that low. Luckily the mcm tools nailed that low and warned of the bounce beforehand. If you didn't have a chance to read the article detailing how that happened, you can find it here: http://mcm-ct.com/blog/anatomy-of-a-tradable-bottom/ While a valiant attempt was made to recoup some of the previous weeks losses early on this week, ultimately they failed with the NYSE closing roughly 0.75% lower than the previous weeks close.
Monday's action was the highlight of the week, the rest of the trading days being more choppy, with a lot of back and forth typical for sideways action.
The weekly cycles show that the back-test of the 2105 break-out level is ongoing. Market bounced from there, but it's too early to call for a successful back-test and sound the all clear for the bulls. The action in YM is also a warning sign, the price sliced directly through the break-out level and is currently in a direct overlap. The action in the next 1-2 weeks appears decisive for a resolution of the back-test and 2105 is still a very important level and worth keeping in mind.
The daily cycles provided an excellent signal last week also. Namely, Monday's rally stopped almost exactly at the previously broken support sitting at 2154.5. The market retreated from there and then chopped around inconclusively. So it appears that we have what looks like 2 successful back-tests. One on the upside (on the weekly) and one on the downside (on the daily). The resolution of one or the other will paint the medium term picture. In the meantime the 2 levels are very important and critical to keep an eye on (2105 and 2154.5).
The preferred path outlined in last weeks update on the NYSE tracked exceptionally well despite the massive volatility we found early on in the week. Currently we are at a crossroads as to whether we'll continue down on the path to 'or 2' or stage a rally from this general vicinity to cyan 3/C/5. In Elliott Wave there are some requirements that must be observed for the validity of a Ending Diagonal (Technical Analysis rising/declining wedge) structure. The first which was satisfied with this weeks price action with the overlap of the first and fourth waves. The second is that the fourth wave cannot be longer than the second wave. This second criteria is of great importance in this instance as it will serve as an early warning that price will have a greater probability to head to much lower levels if that criteria is broken. This week is likely to be an important one with regards to which outcome becomes the most probable. Trade safe.